(Answered) 1 determine stage 1s net cash flow from 2012 to 2020 t0 -

Accounting

1. Determine stage 1's net cash flow from 2012 to 2020 (t0 - t8). Assume that the stage 1 project is judged as average risk. What are its stand-alone NPV, IRR, MIRR, and payback? Give your answers to at least one decimal place.

2. Now consider the expansion (stage 2) project.
(a) What are its stand alone NPV, IRR, and MIRR as of December 31, 2018 (t = 6), under each demand scenario? Show the NPV for today (t
= 0).

(b) What is the expected NPV of stage 2, assuming there is an 80% probability that demand will be high during stage 2, but a 20% chance that demand will be low? Assume that stage 2 is an average-risk project. (Hint: Remember that acceptance of stage 2 requires the firm to forego the stage 1 net working capital recovery. This represents an opportunity cost to stage 2 that is not reflected in the cash flows shown previously.)

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